(BPT) - If you haven't made solid financial plans, now would be a good time to consider a life insurance policy to protect you and your family in your time of need - or protect your loved ones in your absence.
Given the importance of life insurance, it's surprising that 37.5 million American households lack such a policy, according to the 2016 Facts About Life study by the industry group LIMRA. That may be because many people misunderstand how such policies work and how much they cost. For example, recent Insurance Barometer studies by LIMRA and Life Happens found 63 percent of Americans cite expense as the reason they don't carry term insurance, yet 80 percent overestimate the cost - millennials by 213 percent and Gen Xers by 119 percent.
While some Americans hope to rely on other sources to protect their families, they may not realize all the benefits life insurance offers. Every family has different needs, and some life insurance products are flexible enough to offer customizable options to provide a measure of financial security to your spouse and children - the people that matter most.
Consider these other common myths about life insurance:
Myth: Life insurance is only available through financial advisors. In fact, quality policies for your entire family are often available through your employer or your spouse's employer. For example, Boston MutualLife Insurance Company offers a range of workplace solutions paid for by employers, employees or both, including permanent life, term life, critical illness, accident and disability insurance. Talk to your company's HR department about the process involved in securing comprehensive coverage for your family.
Myth: Workplace policies can't offer enough options for your needs. You'll find that well-established life insurance companies understand the market well enough to offer a range of flexible products, including policies that are payroll deductible, stable in cost regardless of your age, portable when you're changing jobs and available with add-on riders or other insurance types through the same carrier.
Myth: Young, healthy people don't need life insurance. The truth is, your health can change at any time and it's best to expect the unexpected. Uninsured people can easily leave behind personal, medical or mortgage debts and/or funeral expenses that end up burdening family members or executors when they die.
Myth: Your life insurance policy only covers you, not your family. Not true. Some products protect you, your spouse, your dependent children and even your grandchildren, often at one affordable cost. That's why marriage and becoming a parent can be excellent reasons for buying new policies.
Investing in life insurance is a crucial step to take to protect yourself and your family from unexpected losses. But it doesn't have to be confusing or complicated. Find more detailed information about life insurance options for you and your family at www.BostonMutual.com.
With the increasing likelihood that Social Security and Medicare benefits may be reduced in the future, it’s more important than ever to use every technique available to maximize your retirement savings. These three outside-the-box strategies could make an enormous difference in your retirement readiness. The sooner you start, the more you may save.
(BPT) - Individuals who rushed to prepay property taxes after the passage of the Tax Cuts and Jobs Act may have saved some money in 2018 — but that’s pennies compared to the long-term tax savings taxpayers should take advantage of before the TCJA’s individual tax provisions are expected to expire in 2026, according to Robert Fishbein, vice president and corporate counsel at Prudential Financial.
Also expected to expire in 2026? According to trustees for Social Security, that’s when Medicare’s main trust fund will run out of money. With the increasing likelihood that Social Security and Medicare benefits may be reduced in the future, it’s more important than ever to use every technique available to maximize your retirement savings.
Three outside-the-box strategies could make an enormous difference in your retirement readiness. The sooner you start, the more you may save.
Fund an HSA for retirement health care
Estimates suggest even a healthy 65-year-old couple will need at least $275,000 to cover retirement health care costs. A Health Savings Account, or HSA, provides a way to save that money without paying a dime in taxes. An HSA account is available to individuals enrolled in a high deductible health insurance plan.
First, these individuals can fund their HSA through a tax-deductible contribution or pre-tax payroll deduction. Second, any interest and investment gains are tax-free. Finally, the funds can be withdrawn tax-free to pay for qualified medical expenses— a triple tax advantage over a traditional savings account.
The best part? There is no requirement to use HSA funds in the year of contribution, which means funds can grow on a tax-favored basis for future health care expense needs.
For 2018, family contribution limits are $6,900, or $7,900 if you are 55 or older, and those amounts are indexed for inflation in future years. If you start contributing the maximum even as late as age 55, and earn 3 percent per year, you could have more than $90,000 to pay for your retirement health care by age 65. If you start contributing the maximum as early as age 40, you could have saved almost $270,000. These funds will continue to grow tax-free in retirement until you need them.
If you don’t use HSA funds in full before you die, excess funds are subject to income tax, but will be otherwise available for your heirs.
Consider a Roth IRA conversion
The typical dogma says that converting an IRA or traditional 401(k) to a Roth IRA does not make sense if you expect your tax rate in retirement to be lower than at the time of conversion. However, lesser known benefits of a Roth IRA may make it worthwhile to have at least part of your retirement assets in Roth IRA form.
Start with no required minimum distributions. With a Roth you aren’t forced to draw down your funds once you attain age 70½ and can continue to benefit from the tax-free growth, thereby maximizing the after-tax funds eventually available for you or your heirs.
Another significant benefit of a Roth IRA or Roth 401(k) is tax diversification. For example, you may choose to take taxable distributions up to a certain amount and then tax-free distributions to avoid a higher income tax bracket.
If you are a high-income taxpayer, Roth IRA distributions are not considered income when determining thresholds for increased Medicare premium charges or the 3.8 percent income tax surcharge on investment gain. If your income is more modest, Roth IRA distributions are not considered income when determining whether you are subject to income tax on Social Security benefits.
If anything, a conversion is more attractive now since you have an opportunity to convert and pay income tax with marginal rates that are generally lower than under prior law. Since individual tax law changes are temporary and tax rates will revert to the former higher amounts starting in 2026, you have an eight-year window to benefit from lower rates.
Make “backdoor” Roth IRA contributions
The tax law prescribes income limits so high-income individuals may not make a direct contribution to a Roth IRA. However, there are no income limits on converting traditional IRA funds to a Roth IRA.
Any person under age 70.5 who has earned income by year-end can make an IRA contribution. While income limits may prevent you from making a pre-tax contribution, you can make this contribution even if you have fully funded a 401(k) or another employer plan.
Once you have made your contribution to a traditional IRA, simply convert that amount to your Roth IRA. As long as this is your only traditional IRA and you have made an after-tax contribution, then an immediate conversion will have converted a tax-deferred asset into a potentially tax-free asset. If you have multiple IRAs, the IRAs are aggregated to determine how much is taxable upon conversion.
While we spend much time on our investment strategies to help gain an extra percentage or two of investment yield, these tax planning strategies can be a more reliable way of maximizing your after-tax retirement income and wealth for your family — no matter how Social Security and Medicare turn out.
Prudential Financial, its affiliates, and their financial professionals do not render tax or legal advice. Please consult with your tax and legal advisors regarding your personal circumstances.
Are today’s senior citizens sufficiently prepared for retirement or have past financial mistakes impeded their progress? What did older Americans wish they knew about managing finances when they were younger? This study from Mike Brown of LendEDU reveals key insights that can help investors of all ages.
For the everyday consumer, getting a grasp on finances can be stressful or even seemingly impossible.
It could take years of balancing a budget and living paycheck-to-paycheck - a crash course of sorts - to full understand the ins-and-outs of personal finance allowing someone to position him or herself for a better financial future.
Unfortunately for some, irresponsible management of finances, such as taking on too much debt or not saving enough, could lead to irreversible damage.
In our latest survey of 1,000 senior citizens, LendEDU sought to uncover how older Americans are faring financially and if they made the right decisions throughout life to live comfortably in their later years.
Are today’s senior citizens sufficiently prepared for retirement or have past financial mistakes impeded their progress? What did older Americans wish they knew about managing finances when they were younger?
Here were a few key takeaways from the study:
Observations & Analysis
More Than Half of Senior Citizens Underprepared for Retirement, Most Wish They Started Saving Sooner!
To gather the data for LendEDU’s story, we surveyed 1,000 Americans, all of whom were at least 65 years of age.
One of the first questions we asked the respondent pool was the following: “What is the biggest financial regret you have from your twenties?”
The plurality of the respondents, 21.4 percent, indicated that the biggest financial regret from their twenties was not saving enough for retirement. Other popular answer choices included spending too much money on nonessential things (17 percent), not investing (12.3 percent), and getting into too much debt (10 percent).
Circling back, it was quite telling that senior citizens regret not saving enough for retirement in their twenties. Getting a jumpstart on retirement is essential to living a comfortable life in one’s later years. Due to compound interest, the earliest possible start to retirement saving will be the most beneficial as your money will have more time to grow.
Professor Timothy Wiedman of Doane University, 66, agreed with most senior citizens who took this survey in that his biggest regret was not getting a jump on retirement while in his twenties.
“I put off starting to save for retirement and didn't open my first IRA until I was a bit over 31 years old. I justified this by telling myself that I could always "catch up" later on my long-term financial plans after establishing a solid career and seeing my income increase,” said Wiedman.
Wiedman soon realized the delay had a substantial impact on his ability to save and earn.
“But the earning power of compound interest is based on time, so an initial delay can have severe consequences. Thus, for young folks these days, opening a Roth IRA as early as possible is vital,” he said. “For example, if a 23-year-old fresh out of college puts $3,000 per year into a Roth IRA that earns a 7.8 percent average annual return, 44 years later at retirement, that $132,000 of invested funds will have grown to $1,009,275. On the other hand, starting the same Roth IRA 20 years later will yield very different results.”
So we know that many older Americans seriously regret not saving for retirement early enough. But were they able to salvage that lost time? Are they prepared for retirement?
The following question was proposed to all 1,000 senior citizen respondents: “As of today, do you believe that you have saved enough for retirement?
The strong majority of older Americans, 54.6 percent, admitted that they do not believe they have saved enough for retirement, while only 26.6 percent think they are on the right track, and 18.8 percent are still unsure.
It came as quite a surprise that so many senior citizens believe they are not aptly prepared for life after work when they should be enjoying warm weather and leisure activities.
But once again, it goes to show the potentially crippling effects of not saving enough for retirement at a younger age. Quite a few senior citizen respondents wished they had saved more in their twenties and that sentiment transferred over to this more black-and-white question.
For reference of what is to come, a LendEDU study found that of 500 millennials who consider themselves to be saving for retirement, 41 percent are using a savings account to save for retirement. A savings account - even a high interest savings account - likely won't produce anywhere near the growth delivered by a 401(k) or individual brokerage account, which 59.4 percent of respondents used.
If those millennials wish to find themselves in a better position than more than half of the baby boomers at the age of retirement, they should probably switch from a savings account to a robo-advisor, 401(k), or brokerage account.
Additionally, when we asked our senior citizen respondents to answer what they know about personal finance today that they had not known at 25, 15.68 percent of the answers were: “I know how to save for retirement.”
The plurality of answers, 28.68 percent, pertained to learning how to live within one’s means, while 25.95 percent of answers were: “I know how to budget.”
Dr. John Story, a 60-year-old college professor at the University of St. Thomas, Houston, summed up this question quite well and further reinforced the importance of getting a jump start on retirement.
“I wish I had known the true cost of debt, and the flipside, the real value of long-term saving.”
With a Lack of Retirement Funds, Many Seniors Relying on Social Security and Life Insurance
As one gets older, there are two components that are thought to be key to achieving a sustained financial comfort. One is life insurance, a product, while the other is Social Security, a benefit.
Life insurance and Social Security benefits become all the more crucial for senior citizens when they have not saved enough for retirement, which is the case for over half of our respondents.
Not surprisingly, many poll participants indicated that they are relying heavily on both things to live their later years comfortably due to a lack of sufficient retirement savings.
In comparison to life insurance, older Americans were more likely to list Social Security benefits as important to their financial strategy. A majority, 69.1 percent, stated that Social Security benefits are a critical component, while 18.7 percent said the opposite, and 12.2 percent were still undecided.
Whereas life insurance must be purchased, Social Security is a benefit that can be qualified for by being of age and by working for a certain number of years (usually 10).
Life insurance is purchased by many senior citizens because it can solidify the financial security of loved ones should the buyer pass away.
While a majority was not achieved, 46.9 percent of senior citizens indicated that life insurance was an important part of their financial strategy. 34.1 percent said that the insurance product does not hold much weight for their financial plan, while 19 percent were unsure.
Considering many of LendEDU’s respondents are not sufficiently prepared for retirement, having life insurance or access to Social Security benefits could become quite pivotal for living comfortably in their later years.
All data within this report derives from an online poll commissioned by LendEDU and conducted online by polling company Pollfish. In total, 1,000 respondents ages 65 and up and residing in the United States were surveyed. These respondents were found via age and location filtering on Pollfish, and then were selected at random from Pollfish’s U.S. user panel of over 100 million. The poll was conducted over a 5-day span, starting on March 26, 2018, and ending on March 30, 2018. Respondents were asked to answer all questions truthfully and to the best of their ability.
Full Survey Results
1. What do you know about personal finance today that you didn't know when you were 25? (Select all that apply)
a. 25.95% of answers were "I know how to budget"
b. 28.68% of answers were "I know how to live within my means"
c. 15.68% of answers were "I know how to save for retirement"
d. 8.57% of answers were "I know how to invest in the stock market"
e. 14.65% of answers were "I understand how consumer credit works"
f. 6.48% of answers were "None of the above"
2. What is the biggest financial regret you have from your twenties?
a. 21.4% of respondents answered "I didn't save enough for retirement"
b. 17% of respondents answered "I spent too much money on nonessential things"
c. 12.3% of respondents answered "I didn't invest my money"
d. 5.5% of respondents answered "I made poor investment decisions"
e. 2.8% of respondents answered "I didn't save enough for my child's education"
f. 10% of respondents answered "I got myself into too much debt"
g. 5.1% of respondents answered "Took a job where I made more money but did not enjoy it"
h. 5.8% of respondents answered "Took a job where I made less money but enjoyed it"
i. 20.1% of respondents answered "None of the above"
3. Is life insurance a critical component of your financial strategy?
a. 46.9% of respondents answered "Yes"
b. 34.1% of respondents answered "No"
c. 19% of respondents answered "Unsure"
4. As of today, do you believe that you have saved enough money for retirement?
a. 26.6% of respondents answered "Yes"
b. 54.6% of respondents answered "No"
c. 18.8% of respondents answered "Unsure"
5. Are Social Security benefits a critical component of your financial strategy?
a. 25.8% of respondents answered "Yes"
b. 29.7% of respondents answered "No"
c. 44.5% of respondents answered "Unsure"
(BPT) - Sponsored Content from Vanderbilt Mortgage and Finance, Inc.
The world that millennials have grown up in is a lot different than the world the Gen Xers and Baby Boomers knew. The digital revolution, widespread use of smartphones and adoption of disruptive technologies such as ride sharing and vacation rental apps are just a few of the factors that have altered the social landscape.
Unfortunately, rising student debt, rising home prices and other economic factors have hit many millennials and left them to believe that they cannot afford a home. Many feel as though they have been priced out of the American dream and they will never be able to buy a home.
But no matter what your age, there are plenty of ways to become a homeowner, you just have to think a little more creatively.
The rise of the rental
Looking at current trends, a recent research study found that more U.S. households are now renting than at any time in the last 50 years. With a rising number of renters, many have worried that we are becoming a nation of renters rather than a nation of homeowners.
This is most evident with the younger generation, people under 30, who the National Multifamily Housing Council have found now account for 50 percent of all renters in the U.S.
They aren’t renting because it’s a more affordable option, either. As many residents know throughout the country, rents are going up and up. Between 2012 and 2015, the median gross rent has gone up 8.24 percent, rising to $959. When you combine that with the utilities, a deposit and first and last month’s rent, it’s a lot of money to spend on something you will never own.
So why do people choose to rent? One reason is that many don’t realize that just like phones, cars and countless other things we use on a daily basis, homes have changed.
New priorities mean a new solution
As demand for housing increases, and prices on new and existing homes continue to rise, manufactured housing has adapted to the standards of today’s first-time homebuyers and provides a solution for a market in short supply of quality, affordable options.
In 2016, the average sales price for a manufactured home without land was around $70,600 — that’s an average of $48.82 per square foot — making them an affordable solution to renters looking to become homeowners.
“We believe manufactured homes offer a great solution for many households seeking affordable housing,” says Vanderbilt Mortgage and Finance Inc. President Eric Hamilton. “We work with our customers to help find financing options that fit their needs and circumstances.”
Renters don’t have to continue doling out a monthly check for something they’ll never own. The housing market has changed and with this change, manufactured homes have brought forth new opportunities to become a homeowner.
Vanderbilt Mortgage and Finance, Inc., 500 Alcoa Trail, Maryville, TN 37804, 865-380-3000, NMLS #1561, (http://www.nmlsconsumeraccess.org/), AZ Lic. #BK-0902616, Loans made or arranged pursuant to a California Finance Lenders Law license, GA Residential Mortgage (Lic. #6911), Illinois Residential Mortgage Licensee, Licensed by the NH Banking Department, MT Lic. #1561, Licensed by PA Dept. of Banking.
(BPT) - The year 2016 was devastating for some safe deposit box holders. In New York, thieves cut holes in the roofs of three banks and brazenly emptied hundreds of safe deposit boxes, leaving the victims' pillaged boxes on the roof and strewn around the vault.
A stealthier thief in Florida picked safe deposit boxes in several banks, emptying the contents without damaging the box or leaving any visible sign of the theft.
These are not isolated incidents. On average, there are between 15-18 robberies or burglaries involving bank vaults every year according to the FBI. Millions of dollars of jewelry, cash, gold and family heirlooms are stolen, leaving devastated box holders dealing with unrecoverable losses.
Still the safest
Despite these occurrences, law enforcement agencies, FEMA, the American Red Cross and AARP all recommend safe deposit boxes to store valuable items, heirlooms and documents. A safe deposit box in a vault is superior to home storage even with a safe. Why? Because a residence is almost 20 times more likely to be robbed than a safe deposit box in a bank. And with rental costs starting at around $30 a year, safe deposit boxes remain one of the best values offered by a financial institution.
Today, most people who rent a safe deposit box assume the bank or a federal agency insures the contents. This is not true, and unfortunately, too many people learn this the hard way.
A standard homeowners policy provides limited coverage for some items in a box, but excludes losses from flood and other risks. They may also have a high deductible.
Specialty insurance designed to cover and protect everything inside of a safe deposit box - including cash, gold and important papers such as wills, titles, deeds, photos and digital backups, is now available. There is no deductible, and risks such as terrorist attacks, hurricanes and earthquakes are covered.
And because you do not need to identify what is stored inside the box to obtain coverage, you can maintain your privacy.
Clearly, there are events that no vault or safe deposit box can protect against. However, there are steps you should take. Safe Deposit Box Insurance, LLC (SDBIC), the leader in protecting valuable assets in secure boxes, has developed a secure storage quiz on secure storage options.
So, despite there being some high-profile break-ins, a safe deposit box is still the best place to store your documents, family heirlooms and other valuables. But because nothing is 100 percent foolproof, it's important to do your research, select the right bank and insure the contents of your box through SDBIC.
If you’re in the throes of settling an estate, whether by yourself or with the assistance of your siblings, consider these tips for getting organized; seeking help; selling property, such as a parents’ home; planning for the unexpected; and taking time to grieve to help chart a smoother course following the loss of a parent.
5 Smart Strategies to Settle an Estate
(Family Features) When a parent passes away, it’s usually left to their offspring to manage and disperse the remaining estate. In the wake of such a loss, emotions can run high, and the sheer amount of paperwork can quickly become overwhelming.
If you’re in the throes of settling an estate, whether by yourself or with the assistance of your siblings, consider these tips to help chart a smoother course.
Get organized. Keep a seemingly endless to-do list manageable by writing everything down. Create a system for prioritizing each task and if there are others who are willing to help, delegate what you can. Establish categories such as bills to pay and other outstanding debts, accounts to close, agencies and organizations that need to be notified of the death and so on.
Know your limits. Some estates are simple and straightforward: There’s a basic will, few assets, known heirs, and it’s easy to grasp what happens next. Others are far more complicated. If you find yourself in over your head, seek help from an expert such as an estate attorney who can guide you through the legalities and paperwork.
Focus on solutions. Remember that even the most seemingly hopeless situations can turn out well if you remain open to exploring solutions. When Karen Jones’ mother passed away, she and her four siblings were left with a house that needed a lot of repairs none of them could afford before it could be sold. Jones learned about HomeVestors from a sister and the two scheduled a free consultation with a local independently owned and operated franchise.
Within 24 hours, Aaron Katz with WinWin Properties presented an offer not only to Jones, but individually to all of her siblings who were not able to meet at the same time. Jones credits Katz’s professionalism, kindness and sensitivity during a difficult time for her family.
An option such as HomeVestors, the largest professional house buying franchise in the nation, offers cash payments and quick closing, which can be helpful in settling an estate. In many cases, homes can also be sold as-is with no repairs and with unwanted contents still inside.
Expect the unexpected. It may come in the form of a change in the will or old letters stashed in a closet, but it’s a safe bet that in settling the estate, you’ll come across something you weren’t expecting. Add this to the emotional simmer you’ve been holding steady and this may be the tipping point to boil you over. Simply put the new information on the back burner for now and return to it later, when you can deal with it more rationally and avoid letting a surprise stain your memories.
Take a break. In the aftermath of a loss, many survivors switch to autopilot, not only to distract their minds from the loss but to regain some sense of control in a situation that can feel helpless. While this coping mechanism may answer a short-term need, be sure to allow yourself time to properly grieve and avoid taking on so much that you neglect your own physical needs, such as food and sleep.
Settling a loved one’s estate isn’t likely to be easy, but taking it all one step at a time will help you take care of business while you make sure you’re still taking care of yourself.
For more information, visit homevestors.com.
Photo courtesy of Getty Images
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